Pit Corporation owns 85% of Stop Company’s outstanding common stock. On 07/01/18, Pit sold inventory to...
Pit Corporation owns 85% of Stop Company’s outstanding common stock. On 07/01/18, Pit sold inventory to Stop in exchange for $560,000 cash. Pit’s cost of the inventory was $420,000.
On 12/18/18, Stop sold 60% of the inventory to 3rd parties at a cash price of $448,000. The other 40% of the inventory remains on hand at 12/31/18.
Prepare below the journal entries prepared by Pit and Stop during 2018
Homework Answers
Journal entries in the books of pit corporations during 2018
| Date | Particulars | Debit | Credit |
| Sale entry of COGS | |||
| 7/1/2018 | Cost of goods sold expense a/c | 420000 | |
| To Finished goods a/c | 420000 | ||
| Cash sale of inventory | |||
| 7/1/2018 | Cash/Bank a/c | 560000 | |
| To sales revenue a/c | 560000 |
Journal entries in the books of stop company during 2018
| Recording cash purchase from pit corporations | |||
| 7/1/2018 | Purchase a/c | 560000 | |
| To Cash/bank a/c | 560000 | ||
| Cash sale of 60% stock | |||
| 12/18/2018 | Cash/Bank a/c | 448000 | |
| To sales revenue a/c | 448000 | ||
| Recording value of closing stock | |||
| 12/31/2018 | Closing stock a/c | 224000 | |
| To Trading a/c | 224000 | ||
| (40% of stock remaining) | |||
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